Michigan Fire Insurance Withholding Program Lawsuit

What is the Fire Insurance Withholding Program

Sections 500.2227 and 500.2845 of the Michigan Insurance Code allow municipalities to participate in what is marketed as the Fire Insurance Withholding Program. Under this "program," local governments like townships and cities can seize and "escrow" up to twenty-five percent (25%) of fire victims' insurance settlement or payouts regarding fire-destroyed homes and businesses. For residential property, the seizure cannot exceed a maximum amount which is adjusted annually in accordance with the consumer price index. The current amount (as of 2025) is over $16,000.00.

In short, our law firm thinks this program is illegal and unconstitutional.

Two Minute Video Explainer


The Michigan "FIW" Program mandates insurance companies to withhold partial payment of insurance payments (and send a portion of it to local governments for "escrow") until government-approved repairs are completed following a destructive fire. Consequently, homeowners are forced to bear the financial burden of repairs or remediation upfront, often leading to significant financial strain. In cases where homeowners lack the necessary funds for immediate repairs, the program exacerbates their distress and causes delays in the rebuilding and recoupment process. The statutory scheme also creates heavy disincentives for homeowners to report fire incidents promptly to their insurers. Homeowners may delay reporting fires to avoid the financial burden of immediate repairs and the subsequent withholding of insurance payments. This delay can exacerbate property recovery and increase the risk of more extensive losses, further straining homeowners and insurance companies alike.

We're Suing the Governments Who "Escrow" Your Money

In our view, the Michigan "FIW" Program infringes upon constitutional rights. The "program" interferes with the right to receive fire insurance payouts, which is protected by the Fifth Amendment. There is also a legal argument it violates Fourth Amendment as well, which guarantees protection against unreasonable governmental seizures. Our law firm is looking for take on cases to challenge the law in federal court. Cases we have undertaken have change the law and helped countless citizens.

If you have been subject to the Fire Insurance Withholding Program, we would like to speak with you. The consultation is at no cost.

Background and History of the FIW Program

Established in 1982, Public Act 495 created the "Fire Escrow Fund" under the Michigan Insurance Code of 1956. The law specified "if a claim is filed for a loss to insured real property due to fire or explosion and a final settlement is reached on the loss to the insured real property, an insurer shall withhold from payment 25% of the actual cash value of the insured real property at the time of the loss."

This transpires if the inspected damage reaches above 49% of the insured property value and only when said property lies in a municipality taking part in the program (township, city, or village). This 25% outlined, which has a maximum of for residential properties (adjusted for inflation annually, concurrent with the consumer price index), is placed into an escrow account by the insurer, where it remains until either the owner completes removal/repairs, or, following 120 days with no evidence of improvements, the municipality can proceed to demolish the structure with the funds made available. The law made it the responsibility of the insurance company to notify the municipality when a property loss has occurred that falls under the program.

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